Assume that the full-employment level of output is $600 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $550 and, at the price level of 100, current aggregate demand is $450. If the government wants to move the economy back to the full-employment level of output and the MPC is 0.9, then it should
A. increase government purchases by $50.
B. increase government purchases by $15.
C. increase government purchases by $5.
D. increase government purchases by $150.
Answer: B
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Economists Cade Massey and Richard Thaler analyzed whether teams in the National Football League distributed salaries efficiently. Massey and Thaler found that
A) both rookie players and veteran players are paid less than the value of their marginal products because of the lack of competition among teams. B) veteran players who sign as free agents are paid more relative to their marginal products than rookie players selected in the first round of the draft. C) rookies are paid salaries greater than their marginal products; veteran players are paid salaries less than their marginal products. D) the first few players selected in first round of the NFL draft are paid much higher salaries relative to their marginal products than players drafted later in the first round.
With its goal of price stability, the Fed attempts to
A) keep the inflation rate from falling below 5% and rising above 10%. B) maintain an inflation rate of zero. C) achieve a low, stable inflation rate. D) counteract periods of inflation with periods of deflation.
A firm's marginal resource cost curve is
a. horizontal only if the firm is a price taker in the product market b. horizontal only if the firm is a price taker in the resource market c. vertical only if the firm is a price taker in the product market d. vertical only if the firm is a price taker in the resource market e. horizontal only if the firm is a price taker in both the product and resource markets
Based on this graph, the result of supply-side policies shifting the long-run and short-run aggregate supply curves rightward is ______.
a. an equilibrium point higher up the aggregate demand curve
b. an equilibrium point lower down the aggregate demand curve
c. a leftward shift of the aggregate demand curve
d. a rightward shift of the aggregate demand curve